Covid And Business: Happily Ever After
Updated: Apr 15, 2020
I’m not sure how much context to provide at the outset of this piece given that Covid -19 is all anyone is discussing irrespective of your consumption tool of choice, be it the news or talking directly to your family. None of us are experts that must be said, although I cannot recall a bigger simultaneous information dump that has taken place on the world’s population, so we are all making sense of it through our own lenses.
I want to look at it from a business and economic perspective for the purposes of the subsequent post. Now that’s not to say I don’t believe in the seriousness of the virus or indeed the imperative need to lockdown, I fundamentally believe the need to lockdown for as long as possible to eradicate the virus to as low as levels as possible to protect as many lives as possible, irrespective of their age, underlying conditions or whichever parameters you may want to place on an individual.
My intention here is to hypothesize and think beyond lockdown and how businesses will function. Whenever faced with turmoil or upheaval, from personal experience I have found that there are two scenarios that almost never play out. The best-case one, and the worst-case one. Without delving into human psychology, I think we lean towards one or the other, or flitter between both.
So, let’s have a think about the best case, and unfortunately from my reading, I think this is where a lot of people placed their bets originally. A simple pause, and a V-shaped recovery. However, this virus is proving to be a worthy enemy, the number of governments that can consider even a modicum of success against it can be counted on one hand and even they are wary at declaring victory too early. The virus seems here to stay for as long as it takes to find a vaccine or a fool proof antibody test (alongside some technology solutions) as a poor workaround. You can’t hit pause for more than a quarter without entering a global depression.
The second reason is the nature of the world that we had arrived at in 2020, almost unchecked consumerism & globalism. The ability to travel globally had become attainable for the vast majority of the world’s middle classes, to frankly live out your own version of the rich and wealthy lifestyles you see on social media were possible for most. Whilst international travel isn’t the cause of the virus and certainly shouldn’t be punished as such, although it is the first to fall victim to its impact, we certainly arrived at a moment in time where it facilitated what’s become a perfect storm. You can add poor leadership in most ‘modern developed’ countries to this, a move towards isolation in the USA and Europe that’s led to a poorly coordinated response amongst other factors that can be explored at a later date. The argument is that irrespective of the source, and the blame game, this potentially would likely have been contained far better at another point of time, somewhere short of a complete global shutdown.
So, we are looking at best at a U-shaped recovery, or a W shaped recovery. The aforementioned worst case is an L shaped, where the economy flatlines and we all just live off what we can produce in our back gardens if we are fortunate to have one, paying a tithe to a local overlord to protect our livestock. So, by my previous logic, we can discount that one also.
So, if the numbers were to dwindle overnight to a manageable level, and the lockdown was lifted in a blanket fashion tomorrow, well that would be great, wouldn’t it? It wouldn’t necessarily be the end, although we may all want to flood into the nearest pub, hug and kiss our closest friends and family before dancing into the early hours, frankly, the virus is still there, and a second spike will mean another lockdown. So, the answer now falls to business in how they can create an environment in which people come and spend their money again.
Now you may be at the point in this post where you are saying, why is this important? Who cares about spending money, the economy, etc., people are dying? We can look back at the past and see that the economy and people dying are intrinsically linked. The depression of 1929 set in motion a chain of events that ended in 1945 when Hiroshima and Nagasaki were destroyed by two nuclear bombs. That’s not to cover up the horror that took place in the intervening years that was probably one of the darkest moments in human history. Even the recent memory of World War 1 wasn’t enough to prevent people from realizing what a zero-sum game war is.
If you feel that example is too distant or not particularly relevant to the modern world, we can take the 2008 crash which has subsequently escalated conflicts in the middle east and let to right-wing governments in the USA, UK, India, Brazil, and others. Resulting in some of the aforementioned breakdowns in international relations that have exacerbated the spread of Covid. The economy is fundamentally linked to our long-term survival whether we like it or not.
So how do businesses coax people back out again once lockdown is lifted, but the reality of corona or one its cousins is here to stay? This is a huge problem obviously, especially when you think about it in simple ways. I’ll pick a simple scenario. One of my ‘guilty’ pleasures was on a weekend, where I’d pop into a coffee shop and grab a coffee and cake as a treat. Although in the complete absence of it now I’m aware of how often I gave in to this particular reward, in fact, you could argue the sight of a particular brand would have me salivating in advance like one of Pavlov’s dog, but that’s another blog post entirely. The point here is those shops aren’t getting my custom anymore, or anyone’s right now.
If the lockdown is lifted tomorrow, they can’t expect that people will flood back into the same levels overnight. So how do they survive? A digital offering is one way, a delivery pickup service, but they can’t expect to replace all their customers that way. After all, I was one of the vast majority of their footfall customers. Limit capacity in the shop? Spread people out? Space out the queue? Table service? All this leads to higher costs with drastically less custom, and that leads to recessions, and again if you say only 50% of the custom they have before they have now, and they deliver everything to a table, prepare everything to the highest hygiene standards, that’s just not a sustainable business. Now you can extrapolate that out to pubs, gyms, and at the top-level concert venues and football stadiums. Whilst social distancing and capacity reduction is far far better than a complete lockdown that we are in now, it still leads to massive business impact and ultimately still a long recession.
One of the early solutions that have been muted is a type of location-based app, to help contact tracing alongside a health passport (only really viable with a strong antibody test) that allows people to move again. This will bring people back into the open, again with limited numbers and creates the safety bottleneck further back at a government level but ultimately causes the above downturn again. Also, people aren’t keen to hand over the data so quickly at government level (despite bizarrely continuing to hand it over to Facebook, Google et al on a daily basis, and even more so at the moment). There is a tradeoff here, frankly, and it’s not an easy one to balance internally. In order to win back our freedom (for want of a better phrase), there’ll have to be an even stronger exchange between government, business, and the individual. A triumvirate of relationships in which little trust already exists and now has to flow easily without any party taking advantage which results in a breakdown which right now can cause physical harm either directly or indirectly.
We can expect to see regulations changing, top-down for business and a duty of care to expand to both its customers and its employees. An obvious example of this is how airport security changes after terrorist attacks, each one providing new information. We can probably expect a form of bio-scan (which already exists in Asia) globally going forward. Will more people work from home? Almost certainly, yes (why they aren’t empowered to already often speaks to the culture of a business). Will people find they have more space at the office? Almost certainly, we can expect office design to be disrupted fairly quickly. There’ll most likely be a cultural shift with regards to coming into work ill, most employers looked at sickness as a cost and guilt placed upon employees for taking time off continues even to this day, despite many of us working in a knowledge-based role where your location has little to do with your functioning. People coming in visibly sick going forward are probably likely to be derided if anything, seen as a risk by the business & colleagues. PPE in some daily form will come in, whether that be masks or something else, and I wonder if once phase one of function and safety is solved, will the fashion industry find innovative ways of personalizing these if they are here to stay?
There will be potential benefits and new business models. An example I follow closely has been gyms and coaches, who have used their social media followings to push online classes via zoom or live on social media. A modern version of 80’s exercise tapes, albeit delivered as a shared experience via technology instead of within the gym itself. These may well be here to stay, gym floors are expensive to lease in city centres, and many may move to a blend of online and ‘in gym’ services. This could be a way of attracting new customers, helping those who do not feel comfortable in a gym achieve a level of mastery on their own and yet pull them earlier into the buying journey for the gym. Segmenting and appropriate pricing levels for different types of member may follow as this becomes embedded. This could extend the reach of personal trainers beyond their locality, especially those that master their social media offering. This is just an example of the opportunity also presented by the current set of circumstances
Let’s return to the notion of visiting your local pub when this is all over to celebrate. Let’s indulge that this venue has a bouncer, a minor inconvenient trade-off. You accept the small level of scrutiny to ensure that everyone in the place is there to have a good time, not cause trouble, or deal drugs, or indeed be underage etc. You normally don’t think about the bouncer again following the immediate experience, well perhaps in a post Covid world, they’ll be scrutinizing your health passport, or even taking your temperature or your movements the last few days summarized in a quick RAG status of how many Covid positive people you interacted with. If that takes half a minute at a door, would you agree to that exchange for a drink right now with your nearest and dearest? I know I would. This may be something that almost certainly plays out at concert venues and stadiums in the future.
To surmise, initially, most businesses were faced with how do we transform to distributed working, retain as many customers as possible and survive. The next challenge is how can we continue to function in the medium to longer-term and given that Covid effects everyone. I think the challenge for businesses as I’ve mentioned above is how to they build Covid into their customer experience, and you may think it doesn’t affect your relationship directly, but it does. Even companies that are doing well in lockdown that on the surface may not be affected, are. Amazon is a prime example, shifting its delivery to complete one step further on a doorstep rather than in a customer’s hands. Of course, the best-case scenario may play out, and in which case you have nothing to do and you’ve just wasted 20 minutes reading a blog and of course we can all live happily ever after.